Written, Inc. has 300,000 outstanding shares of $2 par common stock and 60,000 s
ID: 2420840 • Letter: W
Question
Written, Inc. has 300,000 outstanding shares of $2 par common stock and 60,000 shares of no-par 8% preferred stock with a stated value of $5. The preferred stock is cumulative and nonparticipating. Dividends have been paid in every year except the past 2 years and the current year.
Assuming that $63,000 will be distributed as a dividend in the current year, how much will the preferred stockholders receive?
$21,000
$24,000
$48,000
$63,000
Anders, Inc. has 5,000 shares of 5%, $100 par value, cumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2011. There were no dividends declared in 2009. The board of directors declares and pays a $45,000 dividend in 2010 and in 2011. What is the amount of dividends received by the common stockholders in 2011?
$15,000
$25,000
$45,000
$0
Explanation / Answer
1)
60,000 x 8% x $5 = $24,000 is owed to preferred shareholders each year.
With cumulative preferred shares, preferred shareholders must be paid any dividends owed (in arrears) before common shareholders receive dividends.
2 years x $24,000 = $48,000 owed to preferred shareholders
2)
Amount Earned by common stockholder is in 2011 is
5000 x5%x$1= $25000
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